Archive: September, 2010

In a time of financial volatility and great austerity, would it make sense to gift rich families and individuals a monetary gift over the coming decade? If you ask the average guy on the street, the answer would be a firm an emphatic no. Incredibly, however, this very idea is gaining momentum in Washington as laughable as it sounds on paper. It’s like a modern day Robin Hood is in our midst, except that he’s the antithesis of the classic folk tale figure. The debate in question pertains to former President George Bush’s tax cuts, and whether they should be extended partly, fully or repealed. These cuts are due for expiry at the end of the year and the main reason for their expiry is that they were instituted in the guise of being temporary. They’re so temporary, in fact, that some Capitol Hill fat cats want it to be around for longer. So just how do you define a tax cut? If the  [...]

Companies throughout the length and breadth are raising a whole lot less from their Initial Public Offerings (IPO’s) than at any other time in the previous decade when compared with the avowed amount that they had filed to sell. Fresh IPO’s on the New York State Exchange (NYSE) and the Nasdaq have managed to raise $19.1 billion in 2010, while a wide spread of companies had filed to sell $48.9 billion in terms of shares. That is the largest skew since 1999, and it represents a significant change for those looking to issue shares soon. More than half of all companies that had submitted plans and proposals for IPO’s in the current year (2010, for those of you wondering) have yet to fulfill those expectations after a whopping 61% of all offerings left all buyers with losses. An astounding 68 percent of those deals raised a fair amount less than what they had sought, and that is not so  [...]

It was not even a few months ago that Europe’s sovereign debt crisis had worked investors into a frenzied panic over sovereign risk. At the time, all signs pointed to the dollar being the currency of choice. Benjamin Franklin smiled strongly from the face of paperbacks and he had good reason to; Uncle Sam was faring exceedingly well against the yen, the pound and the euro. The dollar was safe in its role as the world’s reserve currency of choice, and it was the safest bet for investors looking for a haven for their money. In the land of the blind, the one eyed man is king and the US Dollar reigned supreme despite the domestic economy looking shaky. The dollar was all set to stage a rally. How a few months can change everything. It was August 11th when the American dollar collapsed to a 15 year low against the Yen’s value of ¥84.7. The dollar has similarly lost much ground to the  [...]

It doesn’t take a rocket scientist to figure out that the Japanese economy is primarily export-driven to sustain a demand for its unending line of consumer products that it keeps on churning out (which reminds me…must buy that Wii sometime!). And so it comes as no surprise to see the decision of the Japanese government to wade into the waters of the currency markets and weaken the Yen to offer greater support for its economy. But it is a losing cause for the Japanese powers that be since Japan is ploughing a lonely furrow since none of its usual trading partners are in the mix. This is the first time that Japanese moteary authorities and figureheads has intervened and directly influenced its national currency since 2004 when it propped up the US dollar. That was the beginning of a widespread rally that saw the dollar soar and close 2.55 % above the previous days close. The Japanese  [...]

There’s absolutely no doubt about it; the labor market is in dire straits and struggling to stay afloat. The recession that has beset all of us has left behind a barren wasteland that the unemployed are left to roam, with no one spared its aftereffects. A double dip recession is still a possibility, no matter how unlikely, but it is not this that we should be worried. There are deeper social ills that all of us must guard against if we are to avoid falling over the edge and into the chasm that we faced as a nation last year. The US is still not safe from complete catastrophe and this is terrible news for the unemployed or otherwise. A joint report released by the International Monetary Fund (IMF) and the International Labor Organization (ILO) estimates that the loss of jobs since the onset of the crisis is close to 30 million, and this number is 210 million globally. The wounds are there,  [...]

This is possibly, maybe even quite definitely, the worst market for employment in the last half century for Americans. The market is still comatose with no signs of a resurgence coming forth any time soon and even as economists say that the recession is behind us and things can get only better, unemployment levels still are abysmally low. The figures released by the Department of Labor for August reveal a 9.6% rate of unemployment for August and the situation looks even worse when you factor in those that are underemployed across the country. The news isn’t good universally, but these figures hold out the worst for teenagers that will be worst hit by this recession and the widespread wave of unemployment that it brought on. If you though that the general level of unemployment is bad for everyone from a blue collar worker to a white collar manager, you’d be right. If you thought that  [...]

Exchange Traded Funds, or ETF’s, have been doing very well of late with retail money pouring into its coffers but regulators are now beginning to take note of all the money being invested in the ETF industry. These funds are distorting market prices and regulators are now closing in on these funds that are chock-a-block with derivatives and betting on extremely risky markets. As one ETF after another will come unstuck, expect there to be a domino effect that affects other ETF’s too. The Unique Selling Point of any ETF up until this point was the fact that they are a cheaper investment vehicle than mutual funds and it offers easy access to emerging markets and commodities for many that are just beginning to invest money. The ETF industry is expected to grow at 20-30% this year alone and the assets they manage totals $1.1 trillion right now, which still doesn’t compare to mutual funds  [...]

The picket signs have been put away and the rabble-rousing masses are conspicuous by their absence. Wall Street is the world’s largest stock market and it is running as smoothly as Usain Bolt does the 100 metres race, but there is a worrying trend developing on the bourses. Investors are no longer playing the markets with the kind of gay abandon that marked out their approach some time back and its not just because playing the market has become tougher to win in and more fickle than ever. It’s a domino effect of a worse kind for the market with investors lopping off stocks they own and reducing their holdings in favor of safer investments such as that provided by the bond markets. There is a very real fear that this will remain a lingering sentiment; as they say, a crystal vase once broken can be fixed, but the cracks will always remain. This might be a lost generation of investors  [...]

The markets rallied on Friday, but nothing came of it. The S&P 500 was a bit flaccid, to say the least, and it is in many ways a strong reflection of sentiment across the board that is tepid and hesitant. Remember that traditionally September and October are not a good month for stocks and you have good reason to draw just an inch closer to that panic button right away. Volumes have been light and individual investors are not picking up stocks the way they used to, and that can be seen quite clearly in the mutual fund market. Here’s a simple fact; bond funds have recently attracted $25 billion while equities have seen $12 billion fly out of their hands. That is an alarming figure. This is a clear message from investors that they don’t believe the recovery is on track and that they want to keep their money where they can keep an eye on it. Most of these individual investors have  [...]